Director Duties

DIRECTORS` DUTIES AND RESPONSIBILITIES IN RUNNING A LIMITED LIABILITY COMPANY
1 INTRODUCTION
Company directors are appointed by the shareholders to run the company. In running the company they owe some duties and responsibilities to the shareholders and other stakeholders. The most important stakeholders that a company owes duties and responsibilities are the employees, creditors, trading partners, and the state.
The essay gives details of the general duties and responsibilities of all company directors that they need to fulfill in their capacity as directors and specific duties and responsibilities in relation to the position they hold in the company.
2 GENERAL DUTIES AND RESPONSIBILITIES OF DIRECTORS
2.1 DUTIES
2.1.1 FIDUCIARY DUTIES AND DUTIES OF CARE AND SKILL
Fiduciary duties require directors to work in the best interest of directors while duties of care and skill require them to exercise caution when dealing with company affairs. Breach of these duties can lead to legal action being taken against directors. The main duties include:[Thomas Rivers, How to be good: The emphasis on corporate directors' good faith in the post-Enron era, Vanderbilt Law Review, (2005), 58(2), 631-631-675. Retrieved from http://search.proquest.com/docview/198945891?accountid=45049.]
* Duty to act in good faith
This requires directors to act in all honesty when dealing with company affairs. Acting in good faith means that the director when faced with a challenging situation he / she should choose the best course of action as the shareholder himself would have or as any other person in his position as director would have.[IBID.]
In a recent case, the directors were sued by their shareholders for failing to live up to the duty of good faith. The directors had agreed to the actions of the CEO who received a bribe for the sanction of a merger from the expected acquirers. According to the shareholders the CEO had demanded a bribe for the merger to take place. If the directors had intended to act in good faith then they would not have accepted such a deal. The court ruled that the directors along with the CEO had acted in bad faith and were therefore liable for their actions.[Parnes v Bally Entertainment Corp (1997) Del Ch CA No 15192.] [Ibid.]
* Duty to exercise care, skill and diligence
It is expected that directors should act on a knowledgeable ground as any other persons in their capacities would do in performing their duties. They should also possess the knowledge and thoroughness in accomplishing tasks as set out in the corporations act. It is however expected that directors should not show more skill than is reasonable for a person in his capacity.[Ibid.]
In a court case, the judge ruled that directors were liable for making decisions that were uninformed even though they did not have the intention of acting in bad faith. The legal standards regarding duty of care, skill and diligence were also emphasized after the En...